Legislature approves a 28% GST on online gaming

States will need to quickly alter their separate laws since the government plans to implement greater taxes on casinos, horse racing, and online gaming by October 1.

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The Goods and Services Tax statutes were amended by the Parliament on Friday to allow for the imposition of a 28% GST on the face value of all wagers made at casinos, horse races, and online gambling.

States will also need to adopt legislative adjustments to their local GST Acts in order for the 28% levy to take effect, in addition to the amendments to the Central and Integrated GST laws that were approved by the Lower House of Parliament without discussion.

By Friday afternoon, the Rajya Sabha had sent the Bill back to the Lok Sabha, clearing the road for its passage.

The Finance Minister, Nirmala Sitharaman, promised a review of the levy six months after it was implemented and set an October 1 target date for its implementation. The quickly expanding online gaming industry has criticized the tax's impact on investments and jobs. Some online gaming companies have announced layoffs or closures in the past week, indicating that the industry is still concerned about how the levy would affect their prospects.

The Central GST (Amendment) Bill, 2023, and the Integrated GST (Amendment) Bill, 2023, both passed by the GST Council earlier this month, contain a provision requiring offshore online gambling companies serving Indian users to register in the nation and pay taxes or risk having their access to the market restricted.

The Council reconvened on August 2 to discuss the decision in light of industry and the Electronics and IT Ministry, which is in charge of the e-gaming policy, in light of the 28% GST levy that had been agreed on bets made in these sectors at the Council's meeting on July 11.

Despite opposition from States like Sikkim and Goa, who preferred that the tax be assessed on gross gaming income, as is the custom, rather than the face value of bets, the Council chose to uphold its judgment. However, it made it clear that winnings from betting wouldn't be subject to further taxes.

Definitions for virtual digital assets, online gambling for real money, and specific actionable claims have been added to the Central GST statute.

According to Bill's statement of objects and reasons, Schedule III of the Act, which currently includes an entry for lotteries, betting, and gambling, will be changed to include a "specified actionable claim" in order to provide "clarity regarding the taxability of actionable claims involved in or by way of casinos, horse racing, and online gaming."

While the adjustments will make it possible for the GST to be levied on monetary deposits made to gaming portals, including those made with cryptocurrency assets, it is still unclear whether the simple act of recharging payment wallets would constitute a "supply," according to Saurabh Agarwal, an EY India tax partner.

The revisions, he continued, would aid the Revenue Department in defending itself in previous disputes with industry. "This issue is likely to be the subject of interpretation in the time to come," he said.

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